Mega projects may be needed to structurally reduce unemployment in Saudi Arabia by providing new industries and venues for creating jobs, Bank of America Merrill Lynch (BofAML) said in a recent report.
While it is difficult to quantify the impact of these projects, the availability of funding post-Saudi Aramco-SABIC-Public Investment Fund (PIF) deal could support a first phase of mega projects, the report noted.
The economy could thus move closer towards Vision 2030 targets such as reducing the unemployment rate from 12.8 percent to seven percent; increasing female workforce participation from 22 percent to 30 percent; increasing the private sector contribution to GDP from 40 percent to 65 percent; and, increasing the PIF's assets from SAR600 billion to SAR7 trillion.
High unemployment rates amongst Saudi nationals is one of the most critical long term challenges for the consumer sector as the unemployment rate has increased considerably over the past few years; and Saudi's young demographic profile suggests large additions to the workforce over the next five to 10 years.
Unemployment rates amongst nationals touched 12.5 percent in Q1, 2019.
Thus, job growth needs to at least match labour force growth to maintain unemployment rates at current levels, or exceed it to reduce them, the bank said.
Additionally, the initiative by the Ministry of Labour to replace expatriate employees with Saudi nationals over the medium- to long-term will also aid in reducing the overall unemployment rate, it added.
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